For Better Or For Worse

You might feel that you know your customer very well. But do you know when he or she is unhappy? Research indicates that you probably don't. Look at these alarming statistics:

  • The average business manager does not hear from 96 percent of his or her unhappy customers.
  • When a customer is happy about his experience, he tells an average of eight friends. When he is unhappy, he tells 16.
  • Between 65 and 90 percent of your unhappy customers will NOT do business with you again, and you will never know why.
  • It costs, on average, five times as much to get a new customer as it does to keep an existing one.

    These statistics come from John Goodman, president of TARP (Technical Assistance Research Programs) Corp. in Arlington, VA. TARP Corp. conducted extensive research on customer satisfaction for organizations in the tire and auto industries (Ford Motor Co.), several consumer industries (Coca-Cola Co.), government segments (White House, U.S. Postal Service), and the outdoor power equipment industry (John Deere, Case IH).

    "The problem we see is that most dissatisfied customers never complain,"says Goodman. "And when they do complain, most problems are not effectively resolved. Most businesses don't realize how much revenue is lost by this."

    Unhappy customers are expensive

    On average, the potential loss from a consumer's unresolved problem is $142. But the losses can be trailed further than that. TARP's studies show a bad customer experience will hurt you even more. Let's use a word-of-mouth example - one of a rental business' most effective mediums for generating floor traffic. When a customer tells eight friends about his good experience at your business, on average, at least one of them will become your customer.

    The same rule applies to a bad review. You will probably lose at least one potential customer from the bad remarks of a dissatisfied customer. If you extrapolate those potential sales over a seven-year sales cycle, it could result in thousands of dollars of lost sales - all from one bad experience.

    On the flipside, if you can 1) get your customers to tell you when they are dissatisfied and 2) resolve their situation in a timely, effective manner, TARP statistics show 95 percent of those complainants will remain loyal to your business. There are several benefits to having an aggressive customer service system:

  • An improved image. By soliciting complaints and solving problems, you dramatically boost your image and customer confidence.
  • Broadened line loyalty. Customers see you are willing to stand behind your products and services. They'll be back.
  • Better educated customer. Even when customers are not right, they are educated about why a problem happened and will be very careful to avoid the same problem in the future.
  • Effective marketing tool. Producing more satisfied customers means word-of-mouth will consistently bring in more business, sometimes allowing you to cut back on other more expensive marketing programs.

    Turn complaints into sales

    So, what can you do to increase true customer satisfaction (and therefore, increase sales), and prevent future problems of a similar nature? TARP has six steps to help you.

    Before we discuss solutions, though, remember most complaints have nothing to do with actual product failure. TARP research shows that one third are due to personnel, one third to customer misunderstanding of how to properly use the product, and one third to customer abuse of the product.

    "Really, 40 percent of dissatisfaction is caused by the customer because he didn't listen,"says Goodman. "The truth is, you need to anticipate this. Ask yourself and your employees, ‘What are the three stupid things the customer will do? What can we do to save him from himself?'"

    1. Communicate

    People don't think you want to hear their complaints. They also think it will be too much trouble to complain. TARP says to provide an easy channel for submitting customer problems and to make customers aware of what they can do. Your best place to start is with your employees. Keep them on the lookout for problems and give them the authority to solve them. When customers are shuffled from one person to the next, dissatisfaction grows. Other opportunities include:

    Providing comment cards.

    Give them out with every transaction and display them in a highly visible place. Be sure they are postage paid and are addressed to the store manager or owner.

    Conducting customer satisfaction surveys.

    This does not have to be complex. Just have someone approach customers in the showroom and ask customers questions relating to their satisfaction with your business.

    Displaying signage.

    Be sure you have signs that ask for comments and offer help.

    2. Be responsive

    "Customers want a clear, believable explanation, and they want resolution in a timely fashion,"says Goodman. Timing is crucial. Apologize in writing. Saying, "I'm sorry you are dissatisfied with the service"is not an admission of fault. It doesn't cost you much, and it goes a long way in calming an irate customer. Or call the customer - it is more personal and faster than a letter. If the complaint takes longer than two days to resolve, keep the customer informed of its progress.

    3. Keep records

    Customer complaints and inquiries should be classified and logged when they're received. Include all pertinent information, including customer name and number.

    4. Review records

    Once a month, review the log and comment cards. Identify any problems that form a pattern. The log will help you uncover problems with a product or procedure which might not seem important based only on what you perceive. Share your findings with employees and encourage staff input.

    5. Offer incentives

    Let everyone know they are responsible for resolving and preventing customer problems. List it in their job descriptions and reinforce it regularly. Offer incentives to employees who resolve problems effectively. The incentives don't have to be expensive or even monetary; visible recognition is effective. Use pins or pictures on the wall. Take the employee out to lunch or give him or her an afternoon off.

    6. Train your staff

    From the first day on the job, emphasize to all employees that customer service comes first. Train them to both seek complaints and resolve problems. Empower them to create their own solutions.

    A big part of keeping your customers happy is letting them vent when they are unhappy. Let them know you're interested and you care. They will return the courtesy in future sales.